Loans Held-for-Investment
 6 Months Ended 12 Months Ended
Jun. 30, 2016
Dec. 31, 2015
Receivables [Abstract]    
Loans Held-for-Investment
Loans Held-for-Investment

Loans held-for-investment are summarized as follows:
 
June 30,
2016
 
December 31,
2015
 
(Dollars in millions)
Consumer loans
 
 
 
Residential first mortgage
$
2,075

 
$
3,100

Second mortgage
127

 
135

HELOC
346

 
384

Other
32

 
31

Total consumer loans
2,580

 
3,650

Commercial loans
 
 
 
Commercial real estate (1)
976

 
814

Commercial and industrial
615

 
552

Warehouse lending
1,651

 
1,336

Total commercial loans
3,242

 
2,702

Total loans held-for-investment
$
5,822

 
$
6,352


(1)
Includes $221 million and $188 million, respectively, of commercial owner occupied real estate loans at June 30, 2016 and December 31, 2015.

During the six months ended June 30, 2016 and June 30, 2015, we transferred zero and $27 million, respectively, of loans held-for-sale to loans held-for-investment, based upon a change in our intent.

During the six months ended June 30, 2016, we sold nonperforming, TDR and non-agency loans with unpaid principal balances of $110 million. Upon a change in our intent, the loans were transferred to held-for-sale and subsequently sold resulting in a loss on sale of $2 million during the six months ended June 30, 2016, which is recorded in net loss on sale of assets on the Consolidated Statements of Operations. The loans sold also resulted in a charge-off of $8 million during the six months ended June 30, 2016.

Also, during the six months ended June 30, 2016, we sold performing residential first mortgage loans with unpaid principal balances of $1.2 billion. Upon a change in our intent, the loans were transferred to held-for-sale and subsequently sold resulting in a gain of $14 million, which is recorded in net gain on loan sales on the Consolidated Statements of Operations.
    
During the six months ended June 30, 2015, we sold interest-only residential first mortgage loans with unpaid principal balances totaling $386 million, along with $401 million of nonperforming, TDR and non-agency first mortgage loans. Upon a change in our intent, the loans were transferred to held-for-sale and subsequently sold resulting in a loss on sale of $1 million during the six months ended June 30, 2015. The loans sold also resulted in a charge-off of $51 million during the six months ended June 30, 2015.

During the six months ended June 30, 2016, we purchased jumbo residential first mortgage loans with an unpaid principal balance of $150 million with a premium of $1 million. During the six months ended June 30, 2015, we purchased $197 million of HELOC loans with a premium of $7 million.

We have pledged certain loans held-for-investment, loans held-for-sale, and loans with government guarantees to collateralize lines of credit and/or borrowings with the Federal Reserve Bank of Chicago and the Federal Home Loan Bank of Indianapolis. At June 30, 2016 and December 31, 2015, we pledged $4.9 billion and $5.8 billion, respectively.

Allowance for Loan Losses

We determine the appropriate level of the allowance on at least a quarterly basis. Refer to Note 1, "Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies" to the Consolidated Financial Statements and Notes as of and for the period ended December 31, 2015, included in this document, for a description of the methodology. The allowance for loan losses, other than for loans that have been identified for individual evaluation for impairment, is determined on a loan pool basis by grouping loan types with common risk characteristics to determine our best estimate of incurred losses.

The allowance for loan losses by class of loan are summarized in the following table:
 
Residential
First
Mortgage (1)
 
Second
Mortgage
 
HELOC
 
Other
Consumer
 
Commercial
Real Estate
 
Commercial
and Industrial
 
Warehouse
Lending
 
Total
 
(Dollars in millions)
Three Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance allowance for loan losses
$
95

 
$
10

 
$
20

 
$
2

 
$
19

 
$
10

 
$
6

 
$
162

Charge-offs (2)
(8
)
 
(1
)
 
—

 
(1
)
 
—

 
—

 
—

 
(10
)
Recoveries
1

 
1

 
(1
)
 
—

 
—

 
—

 
—

 
1

(Benefit) provision
(7
)
 
—

 
1

 
—

 
—

 
1

 
2

 
(3
)
Ending balance allowance for loan losses
$
81

 
$
10

 
$
20

 
$
1

 
$
19

 
$
11

 
$
8

 
$
150

Three Months Ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance allowance for loan losses
$
188

 
$
12

 
$
21

 
$
—

 
$
16

 
$
12

 
$
4

 
$
253

Charge-offs (2)
(19
)
 
(1
)
 
—

 
(1
)
 
—

 
—

 
—

 
(21
)
Recoveries
1

 
1

 
—

 
1

 
—

 
—

 
—

 
3

(Benefit) provision
(19
)
 
2

 
4

 
1

 
(1
)
 
—

 
—

 
(13
)
Ending balance allowance for loan losses
$
151

 
$
14


$
25


$
1


$
15


$
12


$
4


$
222

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance allowance for loan losses
$
116

 
$
11

 
$
21

 
$
2

 
$
18

 
$
13

 
$
6

 
$
187

Charge-offs (2)
(19
)
 
(2
)
 
(1
)
 
(2
)
 
—

 
—

 
—

 
(24
)
Recoveries
1

 
1

 
—

 
1

 
—

 
—

 
—

 
3

Provision (benefit)
(17
)
 
—

 
—

 
—

 
1

 
(2
)
 
2

 
(16
)
Ending balance allowance for loan losses
$
81

 
$
10

 
$
20

 
$
1

 
$
19

 
$
11

 
$
8

 
$
150

Six Months Ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance allowance for loan losses
$
234

 
$
12

 
$
19

 
$
1

 
$
17

 
$
11

 
$
3

 
$
297

Charge-offs (2)
(60
)
 
(2
)
 
(1
)
 
(1
)
 
—

 
—

 
—

 
(64
)
Recoveries
2

 
1

 
—

 
1

 
2

 
—

 
—

 
6

Provision (benefit)
(25
)
 
3

 
7

 
—

 
(4
)
 
1

 
1

 
(17
)
Ending balance allowance for loan losses
$
151

 
$
14

 
$
25

 
$
1

 
$
15

 
$
12

 
$
4

 
$
222

(1)
Includes allowance and charge-offs related to loans with government guarantees.
(2)
Includes charge-offs of $2 million and $15 million related to the sale or transfer of loans during the three months ended June 30, 2016 and June 30, 2015, respectively, and $8 million and $51 million related to the sale of loans during the six months ended June 30, 2016 and June 30, 2015, respectively. Also includes charge-offs related to loans with government guarantees of $4 million and $7 million during the three and six months ended June 30, 2016, respectively.


The loans held-for-investment and allowance for loan losses by class of loan is summarized in the following table:
 
Residential
First
Mortgage (1)
 
Second
Mortgage
 
HELOC
 
Other
Consumer
 
Commercial
Real Estate
 
Commercial
and Industrial
 
Warehouse
Lending
 
Total
 
(Dollars in millions)
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans held-for-investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated
$
43

 
$
27

 
$
6

 
$
—

 
$
—

 
$
1

 
$
—

 
$
77

Collectively evaluated (2)
2,027

 
61

 
296

 
32

 
976

 
614

 
1,651

 
5,657

Total loans
$
2,070

 
$
88


$
302


$
32


$
976


$
615


$
1,651


$
5,734

Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated
$
7

 
$
6

 
$
3

 
$
—

 
$
—

 
$
—

 
$
—

 
$
16

Collectively evaluated (2)
74

 
4

 
17

 
1

 
19

 
11

 
8

 
134

Total allowance for loan losses
$
81

 
$
10


$
20


$
1


$
19


$
11


$
8


$
150

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans held-for-investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated
$
87

 
$
28

 
$
3

 
$
—

 
$
—

 
$
2

 
$
—

 
$
120

Collectively evaluated (2)
3,007

 
65

 
318

 
31

 
814

 
550

 
1,336

 
6,121

Total loans
$
3,094

 
$
93

 
$
321

 
$
31

 
$
814

 
$
552

 
$
1,336

 
$
6,241

Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated
$
12

 
$
6

 
$
1

 
$
1

 
$
—

 
$
—

 
$
—

 
$
20

Collectively evaluated (2)
104

 
5

 
20

 
1

 
18

 
13

 
6

 
167

Total allowance for loan losses
$
116

 
$
11

 
$
21

 
$
2

 
$
18

 
$
13

 
$
6

 
$
187

 
(1)
Includes allowance related to loans with government guarantees.
(2)
Excludes loans carried under the fair value option.




The following table sets forth the loans held-for-investment aging analysis as of June 30, 2016 and December 31, 2015, of past due and current loans:
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
90 Days or
Greater Past
Due (1)
 
Total
Past Due
 
Current
 
Total
Investment
Loans
 
(Dollars in millions)
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage
$
3

 
$
1

 
$
32

 
$
36

 
$
2,039

 
$
2,075

Second mortgage
—

 
—

 
3

 
3

 
124

 
127

HELOC
2

 
1

 
9

 
12

 
334

 
346

Other
—

 
—

 
—

 
—

 
32

 
32

Total consumer loans
5

 
2

 
44

 
51

 
2,529

 
2,580

Commercial loans
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
—

 
—

 
—

 
—

 
976

 
976

Commercial and industrial
—

 
—

 
—

 
—

 
615

 
615

Warehouse lending
—

 
—

 
—

 
—

 
1,651

 
1,651

Total commercial loans
—

 
—

 
—

 
—

 
3,242

 
3,242

Total loans (2)
$
5

 
$
2

 
$
44

 
$
51

 
$
5,771

 
$
5,822

December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage
$
7

 
$
3

 
$
53

 
$
63

 
$
3,037

 
$
3,100

Second mortgage
—

 
—

 
2

 
2

 
133

 
135

HELOC
2

 
1

 
9

 
12

 
372

 
384

Other
1

 
—

 
—

 
1

 
30

 
31

Total consumer loans
10

 
4

 
64

 
78

 
3,572

 
3,650

Commercial loans
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
—

 
—

 
—

 
—

 
814

 
814

Commercial and industrial
—

 
—

 
2

 
2

 
550

 
552

Warehouse lending
—

 
—

 
—

 
—

 
1,336

 
1,336

Total commercial loans
—

 
—

 
2

 
2

 
2,700

 
2,702

Total loans (2)
$
10

 
$
4

 
$
66

 
$
80

 
$
6,272

 
$
6,352


(1)
Includes loans that are less than 90 days past due, which have been placed on nonaccrual.
(2)
Includes $10 million of loans 90 days or greater past due, accounted for under the fair value option at both June 30, 2016 and December 31, 2015.

For all classes within the consumer and commercial loan portfolio, loans are placed on nonaccrual status when any portion of principal or interest is 90 days past due (or are determined to be nonperforming), or earlier when we become aware of information indicating that collection of principal and interest is in doubt. When a loan is placed on nonaccrual status, the accrued interest income is reversed. Loans return to accrual status when principal and interest become current and are anticipated to be fully collectible.

Interest income is recognized on nonaccrual loans using a cash basis method. Interest that would have been accrued on impaired loans totaled less than $1 million and $1 million during the three and six months ended June 30, 2016, respectively, and $1 million and $3 million during the three and six months ended June 30, 2015, respectively. At June 30, 2016 and December 31, 2015, we had no loans 90 days past due and still accruing.

Troubled Debt Restructuring
    
We may modify certain loans in both consumer and commercial loan portfolios to retain customers or to maximize collection of the outstanding loan balance. We have programs designed to assist borrowers by extending payment dates or reducing the borrower's contractual payments. All loan modifications are made on a case-by-case basis. Our standards relating to loan modifications consider, among other factors, minimum verified income requirements, cash flow analysis, and collateral valuations. TDRs result in those instances in which a borrower demonstrates financial difficulty and for which a concession has been granted, which includes reductions of interest rate, extensions of amortization period, principal and/or interest forgiveness and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral. These loans are classified as nonperforming TDRs if the loan was nonperforming prior to the restructuring, or based upon the results of a contemporaneous credit evaluation. Such loans will continue on nonaccrual status until the borrower has established a willingness and ability to make the restructured payments for at least six months, after which they will begin to accrue interest.

The following table provides a summary of TDRs outstanding by type and performing status:
 
TDRs
 
Performing
 
Nonperforming
 
Total
June 30, 2016
(Dollars in millions)
Consumer loans
 
 
 
 
 
Residential first mortgage
$
21

 
$
13

 
$
34

Second mortgage
30

 
1

 
31

HELOC
21

 
7

 
28

Total consumer loans
72

 
21

 
93

Commercial loans
 
 
 
 
 
Commercial and industrial
1

 
—

 
1

Total commercial loans
1

 
—

 
1

Total TDRs (1)(2)
$
73

 
$
21

 
$
94

 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
Consumer loans 
 
 
 
 
 
Residential first mortgage
$
49

 
$
27

 
$
76

Second mortgage
32

 
1

 
33

HELOC
20

 
7

 
27

Total TDRs (1)(2)
$
101

 
$
35

 
$
136

(1)
The allowance for loan losses on consumer TDR loans totaled $12 million and $15 million at June 30, 2016 and December 31, 2015, respectively.
(2)
Includes $30 million and $32 million of TDR loans accounted for under the fair value option at June 30, 2016 and December 31, 2015, respectively.
Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, but may give rise to potential incremental losses. We measure impairments using a discounted cash flow method for performing TDRs and measure impairment based on collateral values for re-defaulted TDRs.
    
The following table provides a summary of newly modified TDRs during the three and six months ended June 30, 2016 and 2015.
 
New TDRs
 
Number of Accounts
 
Pre-Modification Unpaid Principal Balance
 
Post-Modification Unpaid Principal Balance (1)
 
Increase in Allowance at Modification
Three Months Ended June 30, 2016
 
 
(Dollars in millions)
    Residential first mortgages
3

 
$
1

 
$
1

 
$
—

    Second mortgages
5

 
—

 
—

 
—

    HELOC (2)(3)
20

 
2

 
2

 
—

           Total TDR loans
28

 
$
3


$
3

 
$
—

 
 
 
 
 
 
 
 
Three Months Ended June 30, 2015
 
 
 
    Residential first mortgages
77

 
$
23

 
$
22

 
$
(2
)
    Second mortgages
35

 
1

 
1

 
—

    HELOC (2)
122

 
8

 
7

 
—

    Other consumer
3

 
—

 
—

 
—

           Total TDR loans
237

 
$
32

 
$
30

 
$
(2
)
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2016

 
 
 
 
 
 
    Residential first mortgages
16

 
$
3

 
$
4

 
$
—

    Second mortgages
26

 
1

 
1

 
—

    HELOC (2)(3)
85

 
6

 
5

 
—

    Commercial and industrial
1

 
2

 
1

 
—

           Total TDR loans
128

 
$
12

 
$
11

 
$
—

 
 
 
 
 
 
 
 
Six Months Ended June 30, 2015

 
 
 
 
 
 
    Residential first mortgages
191

 
$
53

 
$
52

 
$
(1
)
    Second mortgages
68

 
3

 
2

 
—

    HELOC (2)(3)
158

 
8

 
7

 
—

    Other consumer
3

 
—

 
—

 
—

           Total TDR loans
420

 
$
64

 
$
61

 
$
(1
)
 
(1)
Post-modification balances include past due amounts that are capitalized at modification date.
(2)
HELOC post-modification unpaid principal balance reflects write downs.
(3)
Includes loans carried at the fair value option.

    
The following table provides a summary of TDR loans that were modified within the previous 12 months, which subsequently defaulted during the three and six months ended June 30, 2016 and 2015. All TDR classes within consumer and commercial loan portfolios are considered subsequently defaulted when they are greater than 90 days past due.
 
TDRs that were modified in the previous 12 months,
which have subsequently defaulted
 
Number of
Accounts
 
Unpaid Principal Balance
 
Increase in Allowance at Subsequent Default
Three Months Ended June 30, 2015
 
 
(Dollars in millions)
Second mortgages
1

 
$
—

 
$
—

Total TDR loans
1

 
$
—

 
$
—

Six Months Ended June 30, 2016
 
 
 
 
 
Residential first mortgages
1

 
$
—

 
$
—

HELOC (1)
4

 
—

 
—

Total TDR loans
5

 
$
—

 
$
—

Six Months Ended June 30, 2015
 
 
 
 
 
Second mortgages
1

 
$
—

 
$
—

Total TDR loans
1

 
$
—

 
$
—

(1)
HELOC post-modification unpaid principal balance reflects write downs.
Impaired Loans

Loans are considered impaired if it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement or when any portion of principal or interest is 90 days past due. The following table presents individually evaluated impaired loans and the associated allowance: 
 
June 30, 2016
 
December 31, 2015
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
(Dollars in millions)
With no related allowance recorded
 
 
 
 
 
 
 
 
 
 
 
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage loans
$
2

 
$
2

 
$
—

 
$
20

 
$
20

 
$
—

Commercial loans
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
1

 
1

 
—

 
5

 
2

 
—

 
$
3

 
$
3

 
$
—

 
$
25

 
$
22

 
$
—

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage
$
41

 
$
41

 
$
6

 
$
65

 
$
67

 
$
12

Second mortgage
26

 
27

 
7

 
28

 
28

 
6

HELOC
6

 
6

 
3

 
3

 
3

 
1

Other consumer
—

 
—

 
—

 
—

 
—

 
1

 
$
73

 
$
74

 
$
16

 
$
96

 
$
98

 
$
20

Total
 
 
 
 
 
 
 
 
 
 
 
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage
$
43

 
$
43

 
$
6

 
$
85

 
$
87

 
$
12

Second mortgage
26

 
27

 
7

 
28

 
28

 
6

HELOC
6

 
6

 
3

 
3

 
3

 
1

Other consumer
—

 
—

 
—

 
—

 
—

 
1

Commercial loans
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
1

 
1

 
—

 
5

 
2

 
—

Total impaired loans
$
76

 
$
77

 
$
16

 
$
121

 
$
120

 
$
20


The following table presents average impaired loans and the interest income recognized: 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
Average Recorded Investment
 
Interest Income Recognized
 
Average Recorded Investment
 
Interest Income Recognized
 
Average Recorded Investment
 
Interest Income Recognized
 
Average Recorded Investment
 
Interest Income Recognized
 
(Dollars in millions)
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage
$
47

 
$
—

 
$
116

 
$
1

 
$
60

 
$
1

 
$
210

 
$
2

Second mortgage
27

 
1

 
31

 
—

 
27

 
1

 
31

 
1

HELOC
5

 
—

 
2

 
—

 
5

 
—

 
2

 
—

Commercial loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
1

 
—

 
—

 
—

 
3

 
—

 
—

 
—

Total impaired loans
$
80

 
$
1

 
$
149

 
$
1

 
$
95

 
$
2

 
$
243

 
$
3


Credit Quality

We utilize an internal risk rating system in accordance with the Rating Credit Risk booklet of the Comptroller's Handbook, April 2011 and the Uniform Retail Credit classification and Account Management Policy issued June 20, 2000 by the Federal Financial Institution Examination Council ("FFIEC") which is applied to all consumer and commercial loans. Descriptions of our internal risk ratings as they relate to credit quality follow the ratings used by the U.S. bank regulatory agencies as listed below.

Pass. Pass assets are not impaired nor do they have any known deficiencies that could impact the quality of the asset.

Watch. Watch assets are defined as pass rated assets that exhibit elevated risk characteristics or other factors that deserve management’s close attention and increased monitoring. However, the asset does not exhibit a potential or well-defined weakness that would warrant a downgrade to criticized or adverse classification.

Special mention. Assets identified as special mention possess credit deficiencies or potential weaknesses deserving management's close attention. Special mention assets have a potential weakness or pose an unwarranted financial risk that, if not corrected, could weaken the assets and increase risk in the future. Special mention assets are criticized, but do not expose an institution to sufficient risk to warrant adverse classification.

Substandard. Assets identified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. For HELOC loans and other consumer loans, we evaluate credit quality based on the aging and status of payment activity and any other known credit characteristics that call into question full repayment of the asset. Nonperforming loans are classified as either substandard, doubtful or loss.

Doubtful. An asset classified as doubtful has all the weaknesses inherent in one classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. A doubtful asset has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral, and refinancing. Generally, pending events should be resolved within a relatively short period and the ratings will be adjusted based on the new information. Because of high probability of loss, non-accrual accounting treatment is required for doubtful assets.

Loss. An asset classified as loss is considered uncollectible and of such little value that the continuance as bankable asset is not warranted. This classification does not mean that an asset has absolutely no recovery or salvage value, but, rather that it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

Commercial Loans

Management conducts periodic examinations which serve as an independent verification of the accuracy of the ratings assigned. Loan grades are based on different factors within the borrowing relationship: entity sales, debt service coverage, debt/total net worth, liquidity, balance sheet and income statement trends, management experience, business stability, financing structure of the deal, and financial reporting requirements. The underlying collateral is also rated based on the specific type of collateral and corresponding LTV. The combination of the borrower and collateral risk ratings result in the final rating for the borrowing relationship.

Consumer Loans

Consumer loans consist of open and closed end loans extended to individuals for household, family, and other personal expenditures, and includes consumer loans, loans to individuals secured by their personal residence, including first mortgage, home equity, and home improvement loans. Because consumer loans are usually relatively small-balance, homogeneous exposures, consumer loans are rated primarily on payment performance. Payment performance is a proxy for the strength of repayment capacity and loans are generally classified based on their payment status rather than by an individual review of each loan.
In accordance with regulatory guidance, we assign risk ratings to consumer loans in the following manner:
•Consumer loans are classified as Watch once the loan becomes 60 days past due.
•Open and closed-end consumer loans 90 days or more past due are classified Substandard.

Commercial Credit Loans
Commercial Real
Estate
 
Commercial and
Industrial
 
Warehouse
 
Total
Commercial
June 30, 2016
(Dollars in millions)
Grade
 
 
 
 
 
 
 
Pass
$
934

 
$
562

 
$
1,505

 
$
3,001

Watch
38

 
20

 
146

 
204

Special mention
3

 
32

 
—

 
35

Substandard
1

 
1

 
—

 
2

Total loans
$
976

 
$
615

 
$
1,651

 
$
3,242

 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
Pass
$
766

 
$
492

 
$
1,181

 
$
2,439

Watch
42

 
30

 
155

 
227

Special mention
2

 
21

 
—

 
23

Substandard
4

 
9

 
—

 
13

Total loans
$
814

 
$
552

 
$
1,336

 
$
2,702

Consumer Credit Loans
Residential First
Mortgage
 
Second 
Mortgage
 
HELOC
 
Other Consumer
 
Total
June 30, 2016
(Dollars in millions)
Grade
 
 
 
 
 
 
 
 
 
Pass
$
2,019

 
$
93

 
$
315

 
$
32

 
$
2,459

Watch
21

 
31

 
22

 
—

 
74

Substandard
35

 
3

 
9

 
—

 
47

Total loans
$
2,075

 
$
127

 
$
346

 
$
32

 
$
2,580

 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
Pass
$
2,993

 
$
101

 
$
353

 
$
31

 
$
3,478

Watch
49

 
32

 
22

 
—

 
103

Substandard
58

 
2

 
9

 
—

 
69

Total loans
$
3,100

 
$
135

 
$
384

 
$
31

 
$
3,650
Loans Held-for-Investment

Loans held-for-investment are summarized as follows.
 
December 31, 2015
 
December 31, 2014
 
(Dollars in millions)
Consumer loans
 
Residential first mortgage
$
3,100

 
$
2,193

Second mortgage
135

 
149

HELOC
384

 
257

Other
31

 
31

Total consumer loans
3,650

 
2,630

Commercial loans
 
 
 
Commercial real estate
814

 
620

Commercial and industrial
552

 
429

Warehouse lending
1,336

 
769

Total commercial loans
2,702

 
1,818

Total consumer and commercial loans held-for-investment
6,352

 
4,448


    
For the years ended December 31, 2015, 2014 and 2013, the Company transferred $30 million, $19 million and $64 million, respectively, of loans held-for-sale to loans held-for-investment.

During the year ended December 31, 2015, the Company sold interest-only residential first mortgage loans with unpaid principal balances totaling $601 million, and residential first mortgage jumbo loans with unpaid principal balances of $9 million. In addition, the Company sold past due (including nonperforming) and troubled debt restructured first residential mortgage loans with unpaid principal balances of $427 million and $8 million of other residential mortgage loans. Upon a change in the Company’s intent, the loans were transferred to held-for-sale and subsequently sold resulting in a gain on sale of $1 million during the year ended December 31, 2015. A portion of the general allowance for loan losses associated with these loan sales was reduced, resulting in a $69 million reduction in the allowance.

During the year ended December 31, 2014, the Company sold nonperforming, troubled debt restructured residential first mortgage and residential first mortgage jumbo loans with unpaid principal balances totaling $632 million and $20 million of other residential first mortgage loans. A portion of the allowance for loan losses associated with these loans was reduced, resulting in a $9 million reduction in allowance. Upon a change in the Company’s intent, the loans were transferred to held-for-sale and subsequently sold resulting in a gain on sale of $11 million.

During the year ended December 31, 2013, the Company sold nonperforming residential first mortgage loans with unpaid principal balances totaling $508 million. A portion of the allowance for loan losses associated with these loans was reduced, resulting in a $66 million reduction in allowance. Upon a change in the Company’s intent, the loans were transferred to held-for-sale and subsequently sold resulting in a gain on sale of $1 million.

During the year ended December 31, 2015, the Company purchased $197 million of HELOC loans with a premium of $7 million, none of which were credit impaired.

The Company has pledged certain loans held-for-investment, loans held-for-sale, and loans with government guarantees to collateralize lines of credit and/or borrowings with the Federal Reserve Bank of Chicago and the Federal Home Loan Bank of Indianapolis. At December 31, 2015 and 2014, the Company pledged $5.8 billion and $4.1 billion, respectively, of loans held-for-investment.

The allowance for loan losses by class of loan and evaluation type are summarized in the following tables.
 
Residential
First
Mortgage
 
Second
Mortgage
 
HELOC
 
Other
Consumer
 
Commercial
Real
Estate
 
Commercial
and
Industrial
 
Warehouse
Lending
 
Total
Year Ended December 31, 2015
(Dollars in millions)
Beginning balance allowance for loan losses
$
234

 
$
12

 
$
19

 
$
1

 
$
17

 
$
11

 
$
3

 
$
297

Charge-offs
(87
)
 
(4
)
 
(3
)
 
(4
)
 
—

 
(3
)
 
—

 
(101
)
Recoveries
3

 
2

 
—

 
3

 
2

 
—

 
—

 
10

Provision
(34
)
 
1

 
5

 
2

 
(1
)
 
5

 
3

 
(19
)
Ending balance allowance for loan losses
$
116

 
$
11

 
$
21

 
$
2

 
$
18

 
$
13

 
$
6

 
$
187

Year Ended December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance allowance for loan losses
$
162

 
$
12

 
$
8

 
$
2

 
$
19

 
$
3

 
$
1

 
$
207

Charge-offs
(38
)
 
(3
)
 
(6
)
 
(2
)
 
(3
)
 
—

 
—

 
(52
)
Recoveries
3

 
1

 
—

 
3

 
3

 
—

 
—

 
10

Provision
107

 
2

 
17

 
(2
)
 
(2
)
 
8

 
2

 
132

Ending balance allowance for loan losses
$
234

 
$
12

 
$
19

 
$
1

 
$
17

 
$
11

 
$
3

 
$
297

Year Ended December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance allowance for loan losses
$
220

 
$
20

 
$
18

 
$
2

 
$
41

 
$
3

 
$
1

 
$
305

Charge-offs
(133
)
 
(6
)
 
(5
)
 
(4
)
 
(47
)
 
(2
)
 
—

 
(197
)
Recoveries
15

 
1

 
1

 
2

 
10

 
—

 
—

 
29

Provision
60

 
(3
)
 
(6
)
 
2

 
15

 
2

 
—

 
70

Ending balance allowance for loan losses
$
162

 
$
12

 
$
8

 
$
2

 
$
19

 
$
3

 
$
1

 
$
207

 
Residential
First
Mortgage
 
Second
Mortgage
 
HELOC
 
Other
Consumer
 
Commercial
Real
Estate
 
Commercial
and
Industrial
 
Warehouse
Lending
 
Total
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans held-for-investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated
$
87

 
$
28

 
$
3

 
$
—

 
$
—

 
$
2

 
$
—

 
$
120

Collectively evaluated (1)
3,007

 
65

 
318

 
31

 
814

 
550

 
1,336

 
6,121

Total loans
$
3,094

 
$
93

 
$
321

 
$
31

 
$
814

 
$
552

 
$
1,336

 
$
6,241

Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated
$
12

 
$
6

 
$
1

 
$
1

 
$
—

 
$
—

 
$
—

 
$
20

Collectively evaluated (1)
104

 
5

 
20

 
1

 
18

 
13

 
6

 
167

Total allowance for loan losses
$
116

 
$
11

 
$
21

 
$
2

 
$
18

 
$
13

 
$
6

 
$
187

December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans held-for-investment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated
$
385

 
$
31

 
$
1

 
$
—

 
$
—

 
$
—

 
$
—

 
$
417

Collectively evaluated (1)
1,782

 
65

 
124

 
31

 
620

 
429

 
769

 
3,820

Total loans
$
2,167

 
$
96

 
$
125

 
$
31

 
$
620

 
$
429

 
$
769

 
$
4,237

Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated
$
82

 
$
5

 
$
1

 
$
—

 
$
—

 
$
—

 
$
—

 
$
88

Collectively evaluated (1)
152

 
7

 
18

 
1

 
17

 
11

 
3

 
209

Total allowance for loan losses
$
234

 
$
12

 
$
19

 
$
1

 
$
17

 
$
11

 
$
3

 
$
297

 
(1)
Excludes loans carried under the fair value option.

The following table sets forth the loans held-for-investment aging analysis as of December 31, 2015 and December 31, 2014, of past due and current loans.
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
90 Days or
Greater Past
Due (1)
 
Total
Past Due
 
Current
 
Total
Investment
Loans
 
(Dollars in millions)
December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage
$
7

 
$
3

 
$
53

 
$
63

 
$
3,037

 
$
3,100

Second mortgage
—

 
—

 
2

 
2

 
133

 
135

HELOC
2

 
1

 
9

 
12

 
372

 
384

Other
1

 
—

 
—

 
1

 
30

 
31

Total consumer loans
10

 
4

 
64

 
78

 
3,572

 
3,650

Commercial loans
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
—

 
—

 
—

 
—

 
814

 
814

Commercial and industrial
—

 
—

 
2

 
2

 
550

 
552

Warehouse lending
—

 
—

 
—

 
—

 
1,336

 
1,336

Total commercial loans
—

 
—

 
2

 
2

 
2,700

 
2,702

Total loans (2)
$
10

 
$
4

 
$
66

 
$
80

 
$
6,272

 
$
6,352

December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage
$
29

 
$
8

 
$
115

 
$
152

 
$
2,041

 
$
2,193

Second mortgage
1

 
1

 
2

 
4

 
145

 
149

HELOC
4

 
1

 
3

 
8

 
249

 
257

Other
—

 
—

 
—

 
—

 
31

 
31

Total consumer loans
34

 
10

 
120

 
164

 
2,466

 
2,630

Commercial loans
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
—

 
—

 
—

 
—

 
620

 
620

Commercial and industrial
—

 
—

 
—

 
—

 
429

 
429

Warehouse lending
—

 
—

 
—

 
—

 
769

 
769

Total commercial loans
—

 
—

 
—

 
—

 
1,818

 
1,818

Total loans (2)
$
34

 
$
10

 
$
120

 
$
164

 
$
4,284

 
$
4,448


(1)
Includes performing nonaccrual loans that are less than 90 days delinquent and for which interest cannot be accrued.
(2)
Includes $10 million and $5 million of loans 90 days or greater past due accounted for under the fair value option at December 31, 2015 and 2014, respectively.
     
Interest that would have been accrued on impaired loans totaled approximately $6 million, $17 million and $23 million during the years ended December 31, 2015, 2014 and 2013, respectively. At December 31, 2015 and 2014, the Company had no loans 90 days or greater past due and still accruing interest.

Troubled Debt Restructurings

The following table provides a summary of TDRs by type and performing status.
 
TDRs
 
Performing
 
Nonperforming
 
Total
December 31, 2015
(Dollars in millions)
Consumer loans (1)
 
 
 
 
 
Residential first mortgage
$
49

 
$
27

 
$
76

Second mortgage
32

 
1

 
33

HELOC
20

 
7

 
27

Total TDRs (2)
$
101

 
$
35

 
$
136

 
 
 
 
 
 
December 31, 2014
 
Consumer loans (1)
 
 
 
 
 
Residential first mortgage
$
306

 
$
44

 
$
350

Second mortgage
35

 
1

 
36

HELOC
20

 
1

 
21

Total consumer loans
361

 
46

 
407

Commercial loans
 
 
 
 
 
Commercial real estate
1

 
—

 
1

Total TDRs (2)
$
362

 
$
46

 
$
408

(1)
The allowance for loan losses on consumer TDR loans totaled $15 million and $81 million at December 31, 2015 and 2014, respectively.
(2)
Includes $32 million and $30 million of TDR loans accounted for under the fair value option at December 31, 2015 and 2014, respectively.

Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, but may give rise to potential incremental losses. The Company measures impairment using the discounted cash flow method for performing TDRs and measures impairment based on collateral values for re-defaulted TDRs.
    
The following table provides a summary of newly modified TDRs and TDR loans in the past 12 months that have been subsequently defaulted during the years ended December 31, 2015, 2014 and 2013. All TDR classes within consumer and commercial loan portfolios are considered subsequently defaulted when greater that 90 days past due.
 
New TDRs
 
Number of
Accounts
 
Pre-Modification Unpaid
Principal Balance
 
Post-Modification Unpaid
Principal Balance (1)
 
Increase (Decrease) in Allowance at Modification
Year Ended December 31, 2015
(Dollars in millions)
Residential first mortgages
325

 
$
81

 
$
80

 
$
(2
)
Second mortgages
97

 
4

 
3

 
—

HELOC (2)
273

 
17

 
15

 
—

Other consumer
3

 
—

 
—

 
—

Total TDR loans
698

 
$
102

 
$
98

 
$
(2
)
Year Ended December 31, 2014
 
 
 
 
 
 
 
Residential first mortgages
165

 
$
48

 
$
47

 
$
3

Second mortgages 
325

 
11

 
10

 
—

HELOC (2)
30

 
1

 
1

 
—

Total TDR loans
520

 
$
60

 
$
58

 
$
3

Year Ended December 31, 2013
 
 
 
 
 
 
 
Residential first mortgages
322

 
$
86

 
$
75

 
$
2

Second mortgages (3)
571

 
22

 
20

 
1

HELOC (2) (3)
313

 
27

 
23

 
—

Commercial real estate
5

 
3

 
3

 
—

Total TDR loans
1,211

 
$
138

 
$
121

 
$
3

 
TDRs that subsequently defaulted in previous 12 months (4)
 
Number of
Accounts
 
Unpaid Principal Balance
 
Increase (Decrease) in Allowance at Subsequent Default
Year Ended December 31, 2015
(Dollars in millions)
Residential first mortgages
3

 
$
—

 
$
—

Second mortgages
2

 
—

 
—

HELOC (2)
3

 
—

 
—

Total TDR loans
8

 
$
—

 
$
—

Year Ended December 31, 2014
 
 
 
 
 
Residential first mortgages
2

 
$
—

 
$
—

Second mortgages
18

 
—

 
—

HELOC (2)
5

 
—

 
—

Total TDR loans
25

 
$
—

 
$
—

Year Ended December 31, 2013
 
 
 
 
 
Residential first mortgages
26

 
$
6

 
$
1

Second mortgages
41

 
1

 
1

Commercial real estate
33

 
1

 
—

Total TDR loans
100

 
$
8

 
$
2

 
(1)
Post-modification balances include past due amounts that are capitalized at modification date.
(2)
HELOC post-modification unpaid principal balance reflects write downs.
(3)
New TDRs during the year ended December 31, 2013, include 463 loans for a total of $31 million of post modification unpaid principal balance second mortgage and HELOC loans carried at fair value.
(4)
Subsequent default is defined as a payment re-defaulted within 12 months of the restructuring date.
Impaired Loans

The following table presents impaired loans with the associated allowance recorded. 
 
December 31, 2015
 
December 31, 2014
 
Recorded
Investment
 
Unpaid Principal
Balance
 
Related
Allowance
 
Recorded
Investment
 
Unpaid Principal
Balance
 
Related
Allowance
 
(Dollars in millions)
With no related allowance recorded
 
 
 
 
 
 
 
 
 
 
 
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage
$
20

 
$
20

 
$
—

 
$
63

 
$
78

 
$
—

Second mortgage
—

 
—

 
—

 
1

 
6

 
—

HELOC
—

 
—

 
—

 
—

 
1

 
—

Commercial loans
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
5

 
2

 
—

 
—

 
—

 
—

 
$
25

 
$
22

 
$
—

 
$
64

 
$
85

 
$
—

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage
$
65

 
$
67

 
$
12

 
$
321

 
$
326

 
$
82

Second mortgage
28

 
28

 
6

 
29

 
29

 
6

HELOC
3

 
3

 
1

 
1

 
1

 
1

Other consumer
—

 
—

 
1

 
—

 
—

 
—

 
$
96

 
$
98

 
$
20

 
$
351

 
$
356

 
$
89

Total
 
 
 
 
 
 
 
 
 
 
 
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage
$
85

 
$
87

 
$
12

 
$
384

 
$
404

 
$
82

Second mortgage
28

 
28

 
6

 
30

 
35

 
6

HELOC
3

 
3

 
1

 
1

 
2

 
1

Other consumer
—

 
—

 
1

 
—

 
—

 
—

Commercial loans
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
5

 
2

 
—

 
—

 
—

 
—

Total impaired loans
$
121

 
$
120

 
$
20

 
$
415

 
$
441

 
$
89

        
The following table presents average impaired loans and the interest income recognized.
 
For the Years Ended December 31,
 
2015
 
2014
 
2013
 
Average
Recorded
Investment
 
Interest Income Recognized
 
Average
Recorded
Investment
 
Interest Income Recognized
 
Average
Recorded
Investment
 
Interest Income Recognized
 
(Dollars in millions)
Consumer loans
 
 
 
 
 
 
 
 
 
 
 
Residential first mortgage
$
150

 
$
5

 
$
402

 
$
11

 
$
603

 
$
17

Second mortgage
29

 
—

 
28

 
1

 
21

 
1

HELOC
10

 
—

 
1

 
—

 
1

 
—

Commercial loans
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
—

 
—

 
1

 
—

 
46

 
1

Commercial and industrial
2

 
—

 
—

 
—

 
2

 
—

Total impaired loans
$
191

 
$
5

 
$
432

 
$
12

 
$
673

 
$
19


Credit Quality

The Company utilizes an internal risk rating system in accordance with the Rating Credit Risk booklet of the Comptroller's Handbook, April 2011 and the Uniform Retail Credit classification and Account Management Policy issued June 20, 2000 by the Federal Financial Institution Examination Council (FFIEC) which is applied to all consumer and commercial loans. Descriptions of the Company's internal risk ratings as they relate to credit quality follow the ratings used by the U.S. bank regulatory agencies as listed below.

Pass. Pass assets are not impaired nor do they have any known deficiencies that could impact the quality of the asset.

Watch. Watch assets are defined as pass rated assets that exhibit elevated risk characteristics or other factors that deserve management’s close attention and increased monitoring. However, the asset does not exhibit a potential or well-defined weakness that would warrant a downgrade to criticized or adverse classification.

Special mention. Assets identified as special mention possess credit deficiencies or potential weaknesses deserving management's close attention. Special mention assets have a potential weakness or pose an unwarranted financial risk that, if not corrected, could weaken the assets and increase risk in the future. Special mention assets are criticized, but do not expose an institution to sufficient risk to warrant adverse classification.

Substandard. Assets identified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. For HELOC loans and other consumer loans, the Company evaluates credit quality based on the aging and status of payment activity and includes all nonperforming loans.

Doubtful. An asset classified as doubtful has all the weaknesses inherent in one classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. A doubtful asset has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral, and refinancing. Generally, pending events should be resolved within a relatively short period and the ratings will be adjusted based on the new information. Because of high probability of loss, non-accrual accounting treatment is required for doubtful assets.

Loss. An asset classified as loss is considered uncollectible and of such little value that the continuance as bankable asset is not warranted. This classification does not mean that an asset has absolutely no recovery or salvage value, but, rather that it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

Commercial Loans

Management conducts periodic examinations which serve as an independent verification of the accuracy of the ratings assigned. Loan grades are based on different factors within the borrowing relationship: entity sales, debt service coverage, debt/total net worth, liquidity, balance sheet and income statement trends, management experience, business stability, financing structure of the deal, and financial reporting requirements. The underlying collateral is also rated based on the specific type of collateral and corresponding LTV. The combination of the borrower and collateral risk ratings result in the final rating for the borrowing relationship.

Consumer Loans

The same rating principles are used for consumer and commercial loans, but the principles are applied differently for consumer loans. Consumer loans consist of open and closed end loans extended to individuals for household, family, and other personal expenditures, and includes consumer loans, loans to individuals secured by their personal residence, including first mortgage, home equity, and home improvement loans. Because consumer loans are usually relatively small-balance, homogeneous exposures, consumer loans are rated primarily on payment performance. Payment performance is a proxy for the strength of repayment capacity and loans are generally classified based on their payment status rather than by an individual review of each loan.
In accordance with regulatory guidance, the Company assigns risk ratings to consumer loans in the following manner:
•Consumer loans are classified as Watch once the loan becomes 60 days past due.
•Open and closed-end consumer loans 90 days or more past due are classified Substandard.

 
December 31, 2015
Commercial Credit Loans
Commercial  Real
Estate
 
Commercial and
Industrial
 
Warehouse
 
Total
Commercial
 
(Dollars in millions)
Grade
 
 
 
 
 
 
 
Pass
$
766

 
$
492

 
$
1,181

 
$
2,439

Watch
42

 
30

 
155

 
227

Special Mention
2

 
21

 
—

 
23

Substandard
4

 
9

 
—

 
13

Total loans
$
814

 
$
552

 
$
1,336

 
$
2,702

 
December 31, 2015
Consumer Credit Loans
Residential First Mortgage
 
Second Mortgage
 
HELOC
 
Other Consumer
 
Total
 
(Dollars in millions)
Grade
 
 
 
 
 
 
 
 
 
Pass
$
2,993

 
$
101

 
$
353

 
$
31

 
$
3,478

Watch
49

 
32

 
22

 
—

 
103

Substandard
58

 
2

 
9

 
—

 
69

Total loans
$
3,100

 
$
135

 
$
384

 
$
31

 
$
3,650

 
December 31, 2014
Commercial Credit Loans
Commercial  Real
Estate
 
Commercial and
Industrial
 
Warehouse
 
Total
Commercial
 
(Dollars in millions)
Grade
 
Pass
$
578

 
$
398

 
$
650

 
$
1,626

Watch
29

 
10

 
119

 
158

Special mention
2

 
—

 
—

 
2

Substandard
11

 
21

 
—

 
32

Total loans
$
620

 
$
429

 
$
769

 
$
1,818

 
December 31, 2014
Consumer Credit Loans
Residential First Mortgage
 
Second Mortgage
 
HELOC
 
Other Consumer
 
Total
 
(Dollars in millions)
Grade
 
Pass
$
1,764

 
$
111

 
$
233

 
$
31

 
$
2,139

Watch
314

 
36

 
21

 
—

 
371

Substandard
115

 
2

 
3

 
—

 
120

Total loans
$
2,193

 
$
149

 
$
257

 
$
31

 
$
2,630